Importer Faces $17 Million Fraud Penalty for Misclassifying Tires
An importer faces nearly $17 million in penalties for misclassifying Chinese tires under duty free tariff subheadings, according to a complaint filed at the Court of International Trade on March 10. The government says China Tire Warehouse falsely classified its new car and truck tires under HTS subheadings for used tires and forestry vehicle tires, avoiding over $400,000 in duties in the process.
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According to the complaint, the alleged misconduct goes back to 2005, when China Tire fired its broker, Ultimate Customs Brokers, for refusing to reclassify its dutiable tires under two duty free subheadings. The importer switched to a new broker, Phoenix International, which began entering the new tires under the duty-free HTS subheading for used vehicle tires. CBP sent China Tire a request for information, and China Tire responded that the entries were all new tires, and should have been subject to a 4% duty. Nonetheless, China Tire immediately resumed misclassifying the tires as tires for forestry and agricultural vehicles to avoid paying duties.
Phoenix International employees told CBP that “China Tire directed the classification to use for the subject entries,” said the complaint. The misclassified entries cost the government $404,082.95 in revenue, of which under $250,000 has been paid.
The government seeks penalties under Section 1592 for fraud, gross negligence or negligence. If China Tire is found guilty of fraud, the government seeks penalties at the domestic value of the entries, $16,888,211.73. If found guilty of gross negligence, the government seeks four times the loss in revenue, about $1.6 million. If China Tire is merely found guilty of negligence, the government is seeking twice the loss in revenue in penalties, or about $800,000.
Email ITTNews@warren-news.com for a copy of the complaint.